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Inventory Management 3

The document discusses 5 problems related to inventory management and optimal order quantities. Problem 1 calculates the economic order quantity (EOQ) and reorder rate for a component with constant annual demand of 250 units. Problem 2 finds the optimal order quantity for dishwashers sold by a store. Problem 3 makes adjustments for storage costs. Problem 4 analyzes whether a company should take a volume discount. Problem 5 determines the safety stock level needed to achieve a 5% stockout rate.

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52 views

Inventory Management 3

The document discusses 5 problems related to inventory management and optimal order quantities. Problem 1 calculates the economic order quantity (EOQ) and reorder rate for a component with constant annual demand of 250 units. Problem 2 finds the optimal order quantity for dishwashers sold by a store. Problem 3 makes adjustments for storage costs. Problem 4 analyzes whether a company should take a volume discount. Problem 5 determines the safety stock level needed to achieve a 5% stockout rate.

Uploaded by

Mikasa Mikasa
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Problem:1 Patterson Electronics supplies microcomputer circuitry to a

company that incorporates microprocessors into refrigerators and other


home appliances. One of the components has an annual demand of 250
units, and this is constant throughout the year. Carrying cost is estimated to
be $1 per unit per year, and the ordering cost is $20 per order.
a. To minimize cost, how many units should be ordered each time an order
is placed?
2∗A∗cost
2∗25 0∗20
EOQ= √ ¿ order
IC
¿ 1
= 100
√
b. How many orders per year are needed with the optimal policy?

250/100=2.5~3
c. What is the average inventory if costs are minimized?
100/2= 50
d. Suppose the ordering cost is not $20, and Patterson has been ordering 150
units each time an order is placed. For this order policy to be optimal, what
would the ordering cost have to be?
150∗150 67500
150= 2∗25 0∗x
√
1
x=
2∗250
=
50 0
= 45

Problem:2 An appliance store sells 500 units of a particular type of


dishwasher each year. The demand for this product is essentially constant
throughout the year. The store orders its products from a regional supplier,
and it typically takes two weeks for the dishwashers to arrive after an order
has been placed. Each time an order is placed, an ordering cost of $1000 is
incurred. Each dishwasher costs the hardware store $300 and retails for
$550. The store's annual cost of capital is estimated to be 7% per year.
Assuming there are no storage costs, find the optimal order quantity.

2∗5 0 0∗1000
√ 21
=218 7%*30=21

Problem: 3 An appliance store sells 500 units of a particular type of


dishwasher each year. The demand for this product is essentially constant
throughout the year. The store orders its products from a regional supplier,
and it typically takes two weeks for the dishwashers to arrive after an order
has been placed. Each time an order is placed, an ordering cost of $1000 is
incurred. Each dishwasher costs the hardware store $300 and retails for
$550. The store's annual cost of capital is estimated to be 7% per year.

Suppose there is a storage cost of $10 per unit. Make the appropriate change
to EOQ formula, and find the optimal order quantity in that case.

This study source was downloaded by 100000825075137 from CourseHero.com on 03-24-2022 05:53:25 GMT -05:00

https://www.coursehero.com/file/59772391/Inventory-Management-3docx/
2∗50 0∗1000
√ 31
=180

Problem: 4 North Manufacturing has a demand for 1,000 pumps each year.
The cost of a pump is $50. It costs North Manufacturing $40 to place an
order, and the carrying cost is 25% of the unit cost. If pumps are ordered in
quantities of 200, North Manufacturing can get a 3% discount on the cost of
the pumps. Should North Manufacturing order 200 pumps at a time and take
the 3% discount?
2 ×1000 × 40
EOC=
= 80
√
12.5

TC= (13*40) +(1000*50) +80/2*12.5


=51,020
TC discount= (5*40) + (1000*48.5) + (12.125*200)/2
=49,912

Problem: 5 The Hinsdale Company carries a variety of electronic inventory


items, and these are typically identified by SKU. One particular item, SKU
A3378, has a demand that is normally distributed during the lead time, with
a mean of 350 units and a standard deviation of 10. Hinsdale wants to follow
a policy that results in stockouts occurring only 5% of the time on any order.
How much safety stock should be maintained and what is the reorder point?

Norm.inv (0.95, 350, 10) = 366

Safety Stock= 366 - 350


= 16

This study source was downloaded by 100000825075137 from CourseHero.com on 03-24-2022 05:53:25 GMT -05:00

https://www.coursehero.com/file/59772391/Inventory-Management-3docx/
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